Philip Morris International (PMI) has invested over $4.5 billion into research, development, and commercialisation of smoke-free products.
PMI is looking to offer smokers reduced risk products instead of cigarettes. In its 2017 sustainability report, the leading global cigarette and tobacco manufacturing company revealed that at least 30% of its volume will come from smoke‑free products by 2025.
“We would like to offer better alternatives to adult smokers in Egypt”, managing director of Philip Morris Misr (PMM) and Levant Vassilis Gkatzelis told Mubasher in an interview.
“PMM is the number one international player in the Egyptian tobacco industry with 22% market share,” Gkatzelis stated.
He added that the Egyptian subsidiary provides around 2,500 direct or indirect jobs across its value chain, including manufacturing, supply chain, and distribution, in addition to more than 100,000 retailers who sell PMI’s products on a daily basis.
Tobacco industry in Egypt
PMM has been playing a major role in developing tobacco industry in Egypt, the largest tobacco market in the Middle East and Africa, Gkatzelis said.
Competition in the Egyptian market has been strong among the international tobacco companies and the country’s monopoly cigarette maker Eastern Co, he indicated.
He mentioned that Eastern Co manufactures about 86 billion cigarettes a year for all tobacco companies operating in Egypt.
Egypt’s tobacco tax revenue accounts for over 8.5% of government tax revenues, and are considered the second largest income contributor to the Arab country’s finances, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).
PMM products get manufactured locally at Eastern Co, Gkatzelis remarked, saying this long-term partnership is strong and based on mutual benefits.
He noted that imported cigarettes are currently available in the North African nation as part of illicit trade, which is considered as a major issue globally.
Cigarettes’ price increase
Tobacco prices are dependent on many factors, he indicated, saying that around 70% of the retail cigarette price consists of tax that has multiple components.
“So, if the price of a cigarette pack is EGP 30, around EGP 21 would be tax,” he explained.
He highlighted another crucial factor— Egypt imports raw materials of tobacco and pays for it with a different currency, adding that the cost of these materials has increased cost after the floatation of the Egyptian Pound.
Gkatzelis also pointed out that manufacturing and distribution processes have to be taken into account as well.
“The market is governed by the price freedom principle, so tobacco companies may set their products’ prices as long as they are complying with the government’s rules and regulations. Sometimes, the price increase is triggered by a tax change,” he noted.
“Taxation is one of the tools that governments use to reduce harm of smoking,” he remarked.
The World Health Organization (WHO) projected that global smoking prevalence will maintain falling by 0.2% per year after seeing a constant drop over the past decades.
PMI has been studying the possibility of developing smoke-free alternatives since early 2000, he unveiled.
The company recently hired over 430 research and development experts and invested over $4.5 billion to provide adult smokers with reduced risk products, Gkatzelis remarked.
PMI has a diverse smoke-free portfolio that includes heated tobacco and nicotine-containing vapor products, he said, noting that the firm’s flagship heated tobacco product, IQOS, is now commercialised in 43 countries.
“PMI is transforming itself from a cigarette manufacturer to a science and technology-driven organization,” he said.
PMI is working along with the Egyptian government and its partners to launch the IQOS in the Egyptian market, he added.
A huge number of IQOS users have stopped smoking cigarettes, he added.
“Although the product has not been launched in Egypt yet, incoming travellers still manage to bring it to the country,” he noted.
He hoped other tobacco companies move in the same direction and produce less rick products, highlighting PMI’s global leading role to ensure a sustainable smoke-free vision.
PMI’s business in Egypt
“We trust the Egyptian economy and its potential to grow and prosper,” Gkatzelis said.
Moreover, Gkatzelis said that he is proud of Egyptians working for PMI for undertaking management roles of increased responsibilities in 12 different countries.
“The newly established Management Hub for Egypt and Levant in Cairo adds regional accountabilities in key areas like Finance, Marketing, Digital and Human Resources, he highlighted.
He also expressed his happiness for being certified for the third year in a row as a Top Employer in Egypt, in line with the global certification.